Museum Closure Exposes Financial Risk of Signature Architecture

NEW YORK–Although the American Folk Art Museum has avoided dissolution thanks to a cash infusion from trustees and the Ford Foundation, the institution’s ongoing financial troubles raise difficult questions about the relationship between signature architecture and cultural capital.

The museum’s former home on 53rd Street opened in 2001 after a renovation by Billie Tsien and Tod Williams. To finance the construction, the museum borrowed $32 million by issuing bonds through the city’s Trust for Cultural Resources, a public benefit corporation that helps cultural institutions borrow money for capital projects. The payments on the bonds were significant, about $3 million a year, and in 2009, the museum defaulted on the debt.

Despite early optimism, the American Folk Art Museum’s renovation project did not raise attendance or donations to the levels needed. Last year, as it ran a nearly $4 million deficit, the museum raised just $3.3 million from donors. As we reported in May, the museum was forced to sell its building on West 53rd Street to the Museum of Modern Art to pay off the debt. Before opening, consultants predicted the building would draw 255,000 visitors a year by 2005. In 2011, the museum only attracted the equivalent of 160,000 per year.

Like many other museums, the American Folk Art Museum saw capital improvement as a means for bolstering public awareness and philanthropic revenue. The last two decades has witnessed a dramatic increase in such projects, with Frank Gehry’s design for the Museo Guggenheim Bilbao probably the most notable in a category which also includes the Milwaukee Museum of Art (Santiago Calatrava, 2001), and the ICA/Boston (Diller Scofidio + Renfro, 2006). These projects, wherein signature architecture is essentially used as collateral for outside financing, differ from other iconic projects such as The Getty Center (Richard Meier, 1997), Islamic Art Museum, Doha (I.M. Pei, 2008), or the ongoing expansion of LACMA (Renzo Piano and Peter Zumthor), which were well-funded before construction.

The American Folk Art Museum serves as a potent reminder of the risk associated with architectural investment. While Yoshio Tanaguchi’s redesign of MoMA (completed 2004) has increased yearly attendance from 1.5 million to 2.5 million, the museum has had to raise its admission price from $12 to $20. The Please Touch Museum in Philadelphia spent $88 million to renovate a large structure constructed for the 1876 Centennial Exhibition, assuming it’s fundraising campaign would cover the costs. Donations slowed drastically after the museum’s reopening in 2008, and the institution has fallen $21.5 million short of its fundraising goal (read more). The Asian Art Museum of San Francisco, which shared space with the de Young Museum until 2003, spent $160 million renovating its new home in the former San Francisco city library. After refinancing with a variable interest rate in 2005, it was soon facing a 9% interest rate, equivalent to half their yearly operating budget (read more). The museum narrowly avoided bankruptcy when its outstanding $120 million debt was refinanced in February (read more).